Paycheck Protection Program (PPP)
Over $248 billion is available for new loans, thanks to the new stimulus bill legislation that was recently signed into law. The Small Business Administration (SBA) has announced that in order to promote access to capital, initially only community financial institutions will be able to make First Draw PPP loans on Monday, January 11, and Second Draw PPP loans on Wednesday, January 13. PPP is expected to open to all participating lenders shortly thereafter.
Limited Eligibility for Second Round PPP Loans
Available to first-time qualified borrowers
Available to borrowers that previously received a PPP loan
Second-time borrowers must have 300 or fewer employees, and before applying for forgiveness, borrowers must prove that they saw a 25% reduction in gross receipts during a quarter in 2020 compared to the same quarter in 2019.
Maximum Loan Amount
The maximum loan amount in the second round is $2 million. Borrowers have an option to calculate the maximum loan amount by multiplying the borrower's average total monthly payroll by 2.5x. One of the following must be used when calculating the maximum loan amount:
Maximum Loan Amounts for the Hospitality Industry
Borrowers that have NAICS Code 72 (typically restaurants and hotels) are permitted to use a 3.5x multiplier of their average monthly payroll costs to calculate their maximum loan amount, subject to the $2 million cap.
Use of PPP Funds
Congress expanded the types of expenses for which PPP loans can be used, which applies to existing PPP loans (except in the event forgiveness has already been obtained) and new loans. At least 60% of the funds should be used for payroll costs, and up to 40% may be spent on operating costs such as rent, covered mortgage interest and utilities, as well as newly approved expenses:
Covered Operations Expenditures
Covered Property Damage Costs
Covered Supplier Costs
Covered Worker Protection Expenditures
As a reminder, PPP loans are designed to be 100% forgivable if the proceeds are spent in accordance with program rules. Additional Paycheck Protection Program Round 2 highlights and immediate information can be found in the National Law Review.
How To Apply
Click here for the form required to apply for PPP with an eligible lender. As during the initial round of PPP loans in 2020, the Small Business Administation (SBA) will not accept PPP applications directly from small businesses during the current 2021 round — you must apply through a participating financial institution (click here for a list). The program is expected to close to all borrowers on March 31.